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Wealth report: Old and new money flourish side-by-side in booming Quebec

Advisors aim to meet the needs of two diverse groups with differing attitudes toward wealth

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Quebec’s economy is on fire, and in a very good way. A pronounced surge in the tech sector is complementing the province’s classic economic engines of manufacturing, real estate and health care. Quebec boasted the highest GDP growth in Canada last year, and analysts are predicting spurts of 2.7 per cent in 2022 and 2 per cent in 2023.

Year to date, total exports have increased 12.2 per cent, largely due to the booming U.S. housing market and strong auto sales, which have led to high demand for forest products and aluminum. But it’s technology – fintech, artificial intelligence and biotech start-ups – that’s accounting for a lot of the province’s new wealth.

“Quebec is very dynamic,” says Aurelie Jaclot, partner and relationship lead with Grayhawk Wealth in Montreal. “The M&A space has never been more vibrant. And there are more and more tech entrepreneurs, who are getting younger by the day.”

The result is a mix of old and new wealth – established families that made their money predominantly off textiles and manufacturing, coupled with young tech entrepreneurs who are fresh off major liquidity events, having sold their businesses.

“There are still some storied francophone families whose fortunes are being passed down,” says Mindy Mayman, partner, chief compliance officer and portfolio manager with Richter in Montreal. Then there’s the younger generation that’s making big money, is new to wealth and seeks information and guidance, she says.

Family offices thus are working to meet the needs of two diverse groups. On the one hand, advisors need to initiate dialogue with members of the older generation about wealth and succession planning. On the other, they need to provide education and a holistic approach to wealth management for younger clients who are newer to wealth.

There seems to be less loyalty to the Canadian banks as a source of wealth management.

Mindy Mayman, Richter

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That has left the province short of capable, trusted advisors.

“Wealthy families are very underserved in Quebec, says Jaclot, “because there aren’t that many trusted advisors who can coordinate all of their different needs without selling any products.”

Let’s (not) talk about money

The duality of old and new wealth has created an interesting dynamic in Quebec, says Mayman. On the one hand are older families who may not be used to discussing wealth or having money-focused conversations with younger family members.

“The Catholic church was very dominant in Quebec, and the attitudes toward money are very influenced by Quebec history,” she explains. These families “almost can’t make peace with the amount of wealth they have created.”

Money has also brought feelings of guilt, emotions that are not unique to older generations, says Mark Auger, co-founder and CEO of Crysalia in Montreal. Many younger people to whom wealth is being passed down also wrestle with it. They’re saying “Why me? Why now?” he says.

Yet, despite these challenges around inheriting wealth, many younger family members are less averse to discussing money and more apt to reach out to advisors for financial advice, says Jaclot.

Some long-standing families also feel mistrust toward Canada’s big banks, which were formerly entirely headquartered in “English Canada,” says Mayman. And while that’s changing, those sentiments remain. “There seems to be less loyalty to the Canadian banks as a source of wealth management,” she says.

That means family office advisors must work hard to open up lines of communication with the older generation and encourage discussions about wealth transfer and ensure they are educating next-gen family members about their wishes and goals, says Mayman.

Many families put things off for years. “A lot of families wait fairly late to have those conversations,” says Jaclot. “Talking about money was taboo for many traditional families. But including [younger members] in the conversation is very important.”

Communicating in French is paramount

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Mayman says education is key during this process to ensure “the next generation inherits the wealth in a structured and enlightened manner, while preventing a ‘shirtsleeves to shirtsleeves in three generations’ scenario. “The family office’s role is to prevent that from happening,” she says.

Ensuring all goes smoothly also means speaking clients’ language, says Auger. To build trust and communicate the most freely with these families, speaking French is paramount, he says. This can ensure that a relationship is quickly established and that nothing – especially the discussion of complicated financial structures – is lost in translation.

“There is an inherent desire to be serviced in French,” he says of Quebec clients.

As a result, having staff who speak fluent French offers family offices a competitive advantage. “More outside opportunities present themselves to those presenting the opportunities in French.”

An approach for young entrepreneurs

At the other end of the spectrum, younger clients with newfound fortunes are seeking guidance on how to manage their wealth, but they need a holistic approach, says Jaclot.

Many newly wealthy clients try to seize on a number of investment opportunities, she says, often through a variety of brokers. “Very often those people have many brokers in banks but they don’t know what their overall [financial] situation looks like,” she says.

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They need a broader vision and education about alternative investments such as private equity, hedge funds, real estate and infrastructure, she says. “They deserve access to those kinds of strategies and world class managers,” she says.

Many of these entrepreneurs are not very well organized and “have to find a purpose for their wealth. It’s the role of a family office to help define that objective.”

What’s clear is that opportunities certainly abound in Quebec, and family offices that provide nuanced, tailored service can capitalize on them.

“You need a group of advisors that can support the family in these tasks,” says Auger. “There are a number of perspectives and sensitivities that need to be worked through.”

 

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